Sourcing Trends for 2023
Sourcing Trends for 2023 still sit in the shadow of Covid-19, although with an exit strategy in sight, there are now other considerations for any sourcing strategy.
For the third year running, amazingly the Pandemic is still a part of the conversation when looking forward into 2023 as it is currently unleashed in China; the final frontier of Covid restrictions. I do not think anyone would have anticipated the disruption that this Virus has caused, and the lingering impact it has had back in 2020 (not even our predictions did!). The good news is that now – barring any adverse variant – there is a genuine exit strategy that is global.
The disruption of the past couple of years ranging from manufacturing shut downs, market access, freight rates spiking and imbalances in supply and demand, all appear to be abating. However, the spectre of inflation has come to the fore and is wreaking havoc in many economies. The ‘cost of living’ is now front and centre for many consumers dealing with a barrage of price rises across products, energy and borrowing costs. There is an inevitability that this will impact retail sales in many countries. But with lower demand, there will be opportunity as global commodity prices settle and freight rates drop from the highs of 2022.
So, what does this mean for 2023? Will Covid no longer be a consideration for Sourcing Directors? What technological trends will come to the fore? We have again dusted off our crystal ball to see what sourcing trends we think will be a feature of 2023 (Spoiler Alert – ET2C is not able to predict the future but be good if we could!).
- Endemic Part II: With China opening its borders on January 8th– the last country to do so – finally removing the ‘Covid Dynamic’ policy, there is now a genuine pathway to normalisation for doing business in Asia and travelling to China.
- Prediction: It is likely that there will be disruption around CNY in China given the high level of infections that may impact factories immediately returning to work. December’s export figures in China are certainly soft and a part of this is due to the reopening and wave of infections.
- China Sourcing: Even with companies continuing to look at diversifying their supply chains (as we have been saying, to ‘remove reliance on any one market where relevant), with freight rates falling and China re-opening, expect companies to refocus on Chinese manufacturers from a cost perspective in the short term.
- Prediction: As well as travel picking up to China in Q1 and into Q2 to meet with suppliers face to face once more, the Canton Fair will likely be a focal point for travel and expect large attendees (book hotels in Guanzhou early!)
- Near Sourcing:The appetite for Near-Shoring as part of a ‘basket of countries’ will continue with many companies as a medium term movement. For the US, Mexico is the obvious sourcing partner being just literally a stone’s throw from the its Southern border. Other Latin American markets will also be relevant including Central America such as Guatemala and Nicaragua. From a UK and EU perspective, Turkey continues to be the largest Mediterranean near shoring partner with Morocco, Egypt, Jordan and Tunisia also increasing in importance. Other Eastern European countries also add options.
- Prediction: Companies will continue to embed greater resilience within their supply chains and look to remove dependency on any one market. Remember, this will bring additional complexity (language, culture, regulations, legal etc.) as you move into new markets and making sure you have the capability and reach to manage suppliers will be important.
- India: Narendra Modi swept to power in 2014 as India’s Prime Minister. One of his first initiatives was a re-boot of China’s ‘Made in China’ from 2001 that was launched to much fanfare – ‘Made in India’. The promise of investment and ‘corridors’ appeared to get swept aside by a deluge of other domestic issues. The result was that ‘Made in India’ never really gained the prominence it demanded on the global stage.
- Prediction: With companies looking to broaden their supply chains, and India looking to actively develop the manufacturing base beyond the more traditional industries (textiles etc), it is now well placed to pick up some additional business. The Year of the Tiger may be coming to an end in China, but another Tiger is lying in wait!
- Carbon Neutrality & Carbon Zero: On the back of COP27, there is renewed focus on carbon emissions, particularly for companies that 75% sit within Scope 3, the Supply Chain. Amid a multitude of Greenwashing accusations (some companies have been fined for their claims), GHG emissions remain an important focus going forward for companies.
- Prediction: Building on 2022, carbon emissions data is becoming a key part of any buying decision. A framework for both reporting GHG emissions and paying for will likely be set out over the medium term – make sure you are prepared!
- Data & Analytics: As with many aspects of the digital age, there are ways of using technology to improve the efficiency and output of processes. The same applies to sourcing and the broader supply chain. It is not always easy but worth maintaining momentum as effective data drives better decision making – particularly helpful when you are dealing with products in overseas markets.
- Prediction: Continual evolution of supply chain data and decision making.
- Product Passports: The amount of compliance and data that is linked to just one product is becoming more and more burdensome to manage. Once you add on thousands of skus, it becomes even more complex to manage effectively. Well, product passports will be able to ‘enhance sustainability and accessibility of products by increasing product traceability’. They will be introduced across three key categories – from textiles, car batteries, packaging, electronics, food and construction products) by 2024 (that’s only one year away!) in the EU.
- Prediction: Expect this to gain broader appeal in multiple markets and I suspect that Blockchain technology may also be used to ensure the provenance a product. It would mean that all relevant data to that product would be available digitally, likely at the touch of a button/scan of a QR code!
- Rugby World Cup 2023: Our sports predictions have been fantastically wide of the mark – although Jamaica made it to Beijing, the Men’s 2 and 4-man teams came last in both events, with the Woman’s team coming 19thout of 20 competitor; they were not victorious. This year we turn to the Rugby World Cup. It’s got to be the French at their home World Cup this year, with an honourable mention to the Italians, who will cause a few upsets with their young and exciting team!
HAPPY NEW YEAR of the Rabbit
The year of the Rabbit brings in, of course, fertility but also of luck! I think there is a sense that with everything going on in today’s world, a fair share handed out to all will be well received! At ET2C, we are always looking to the future to ensure that we are providing our clients with the most relevant services and products. Please contact us at firstname.lastname@example.org.